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Uruguay is Gateway to Mercosur: Ambassador Alvaro Diez de Medina
The Washington Diplomat / July 1998

By Larry Luxner

Despite its small size, Uruguayan Ambassador Alvaro Diez de Medina says there's no reason his sparsely populated country -- which has eight times as many sheep as people -- shouldn't be the gateway to South America's booming Mercosur trade bloc.

The 41-year-old diplomat took up his post in July 1995, four months after the inauguration of Uruguayan President Julio María Sanguinetti. A lawyer and banker by profession, the youthful-looking ambassador proudly reels off his country's vital statistics: adult literacy of 96%, an unemployment rate of 10.3% (the lowest in three years), projected 1998 economic growth of 3.7% and an inflation rate of 11% -- quite low by Latin American standards.

"By year's end, it'll be in the single digits," says Diez de Medina, adding that the Asian financial crisis that clobbered neighboring Brazil earlier this year has been a temporary boon to Uruguay, often called the "Switzerland of Latin America" because of its strict bank secrecy laws and stable political environment.

"Due to the Asian crisis, we have seen a renewed interest in Mercosur, and that has impacted my speaking engagements," he says. "Investors are taking a new look at Latin America, and at Uruguay in particular."

Helping the Missouri-sized nation of 3.2 million is the fact that its capital city, Montevideo, is the administrative headquarters of the Southern Common Market (known in Spanish as Mercosur), whose founding and associate members now include Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay.

Like their European counterparts in Brussels, Latin bureaucrats now gather for conferences at the elegant Edificio Mercosur building, inaugurated by half a dozen South American heads of state last December. At night, the former hotel's brightly illuminated facade gleams like a beacon along La Rambla, Montevideo's seaside boulevard.

"Of all the countries in Mercosur, the Uruguayan population is the most Mercosur-conscious," says the ambassador. "People are clearly taking Mercosur into consideration, and it's even becoming a part of their personal plans."

Interestingly, Diez de Medina was not born in prosperous Uruguay, but in Bolivia, the poorest country in South America. He came to Montevideo at age four, and became a Uruguayan citizen upon his 18th birthday; most of his family still lives back in La Paz.

Trained as a lawyer, Diez de Medina was working at the local office of Swiss bank UPB when President Sanguinetti tapped him to be Uruguay's man in Washington -- suddenly launching his diplomatic career.

"The president was sworn in Mar. 1, 1995. He called me on Mar. 12 and offered me the job," he said. Diez de Medina immediately accepted, and one of the first things he did upon arriving in Washington was move the Uruguayan Embassy and its 12-member staff from the F Street townhouse it had been renting for 30 years to a more upscale location along M Street in Georgetown. Since then, says the diplomat, most of his time is spent giving speeches.

"I try to concentrate my activities on promoting Mercosur, together with the ambassadors from the other Mercosur countries, especially Argentina's Diego Guelar," he said. "We have a permanent road show. I spend most of my time out of Washington. Within the beltway, I'm just one of 170 ambassadors. Outside the beltway, I can make a greater impact."

Before 1995, he said, the job of Uruguayan ambassador to the United States was very limited. But with the Mercosur integration process now in full swing, Uruguay has become the gateway to 220 million consumers -- and that's attracted a flood of investment.

A visit to Montevideo reveals the new prosperity evident throughout Uruguay's graceful capital city. Gleaming Nissans, Toyotas and Fiats share the streets with occasional Model T's, Cords and other relics from the 1930s and 1940s, while downtown, a new, steel-and-glass, 26-story addition to the Victoria Plaza Hotel towers over the quiet square where national hero José Artigas is entombed.

Near the recently privatized container terminal, state phone monopoly Antel has just laid the cornerstone for its 34-story, needle-shaped "Torre de las Comunicaciones," which will be the tallest building in Uruguay upon completion in 2000. And the beach resort of Punta del Este, a 90-minute drive east of Montevideo, has just inaugurated a new $40 million international airport, as well as the $207 million Conrad Hotel & Casino, which boasts more slot machines and gaming tables than any other resort in South America.

"If money talks, then it's obvious that a $19 billion economy is not a very attractive reference for investment. We're a small country, with an economy roughly the size of Dallas-Fort Worth," he pointed out. "What gives us more leverage is that decisions taken by Mercosur must be taken by consensus. This gives us an disproportionate importance."

Diez de Medina says that historically, Uruguay has had closer ties with Europe than with the United States, "a clear contrast with northern South America and the Caribbean, which looks at Miami as its capital."

Nevertheless, he says, "President Sanguinetti in no way has diminished the importance of the United States. The fact that he appointed me as an ambassador, coming from the private sector, was interpreted as a signal that he intended to seek closer ties" with the Clinton administration, which is pushing a Free Trade Area of the Americas by 2005.

"This is my first post, and probably my last," says the diplomat, who has two children. "It's obviously very hard on your family life when you're the ambassador and the president asks you to carry the national banner in the United States." He plans to stay in Washington until Mar. 1, 2000, the day Sanguinetti's term of office ends.

In the meantime, Diez de Medina says the major focus of his job is economic rather than political, since "our political agenda is minimal, and there are no [policy] differences between the United States and Uruguay."

One area that has raised a storm of controversy, however, is Uruguay's human-rights record from the 1973 to 1985, when the military dictatorship at that time was linked to widescale abuses including child abduction, torture and execution of political "subversives." Last year, the Washington-based Council on Hemispheric Affairs, in a scathing report entitled Uruguay's Dirty War Legacy, accused the Sanguinetti government of allowing former military men to live in palatial mansions, where they are "inextricably involved in protection rackets, drug-trafficking operations and contraband activities."

Diez de Medina calls the report "grotesque," saying that it ignored a 1986 amnesty law supported by voters in a subsequent referendum.

"This is a very difficult issue," he says. "After we came out of the military dictatorship, Parliament approved what amounted to an amnesty for all crimes committed by the military. Human-rights groups moved for a referendum, which passed by a 60-40 margin. Given this political fact, what can we do? Our options are clearly not to punish people for crimes committed during this period. The legislation does not allow it."

Sanguinetti, who came on an official visit to Washington in May, says his political and economic policies seek to improve the competitiveness of Uruguayan public and private enterprises, while gradually privatizing state entities and granting long-term concessions to private interests in the areas of road construction, port and airport operation, gas pipelines, forestry, water and sewer systems.

Indeed, as the Uruguayan economy improves, it sees its future linked not so much to traditional exports like beef, wool and grain, but more in terms of tourism, financial services and telecommunications. In the last few months, Walt Disney Co. has reportedly been talking to Tourism Ministry officials about investing up to $100 million in a theme park in either Montevideo or the small port city of Colonia.

In late March, nine international consortia representing firms from Argentina, Belgium, Brazil, Canada, France, Germany, Italy and the United States submitted 30 offers to construct and operate Montevideo's new Carrasco International Airport, in what's estimated as a $180 million venture.

Likewise, a consortium formed by British Gas, Amoco and Argentina's Bridas recently won the bid to construct a 150-mile gas pipeline between Buenos Aires and Montevideo. Construction on the $100 million Gasoducto del Sur will begin in October and be completed by late 1999, with gas deliveries to begin Jan. 1, 2000.

The most important project, however, is a $1 billion bridge known in Spanish simply as the puente. When finished, this 26-mile bridge -- the longest of its kind in the world -- will link Buenos Aires with Colonia, providing a direct highway route for truckers transporting goods between Argentina and São Paulo, Brazil.

"Only the left-wing and right-wing fringes of political society are opposed" to the bridge, says Diez de Medina. "Its impact will be substantial in every aspect of economic activity. It will clearly put our country in the middle of the São Paulo-Buenos Aires corridor, and it will bring new life into the interior of the country. It will also give us the necessary resources we need to upgrade our highway system."

Yet Diez de Medina says he's uncomfortable with the idea of Montevideo on its way to becoming the Brussels of South America.

"Mercosur started in 1991, initially as a trade complementation agreement between Argentina and Brazil. We've seen this quantum leap take place in a five-year period. We're moving into areas we thought we'd never discuss. Unlike the European Union, Mercosur never set for itself ambitious goals. We don't have anything like a European Parliament. What we have is a permanent secretariat."

He adds that "more important than having a common currency is to agree on a dispute resolution mechanism. While I think having a common currency is a good idea, this is probably not the moment."

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